The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge

OPINION AND ORDER

Plaintiffs, members of a putative class, allege that defendants
violated the Racketeer Influenced and Corrupt Organizations Act
("RICO") and are liable for damages and other relief arising from
unjust enrichment, breach of contract, breach of the duty of good
faith and fair dealing, breach of fiduciary duties, fraud,
negligent misrepresentation, professional malpractice, unethical,
excessive and illegal fees, and conspiracy.*fn1 In an
Opinion and Order dated April 30, 2004 (the "April 30, 2004
Opinion"), this Court denied defendants' motion to compel
arbitration, finding that the arbitration clauses were
unenforceable because the underlying consulting agreements were mutually fraudulent, and alternatively, that the
services the BDO Defendants provided to plaintiffs fell outside
the scope of the consulting agreements.*fn2 The Court of
Appeals reversed this Court's factual findings and vacated this
Court's order as to those parties that were signatories to the
consulting agreements.*fn3 The Court of Appeals remanded the
action to this Court for consideration of first, "whether
plaintiffs were estopped from avoiding arbitration with the
Deutsche Bank defendants, non-signatories to the consulting
agreements" and second, "whether the non-signatory plaintiffs
should be compelled to arbitrate their claims against defendants
alongside the signatory plaintiffs."*fn4

Deutsche Bank now moves for a stay of this action pending
arbitration pursuant to section 3 of the Federal Arbitration Act
("FAA").*fn5 For the reasons set forth in this opinion,
Deutsche Bank's motion is denied. The BDO Defendants have
withdrawn their motion to compel arbitration against
non-signatory plaintiffs,*fn6 and therefore, this Court does not reach the second issue presented
on remand.

II. BACKGROUND

A. Facts

The factual allegations giving rise to this litigation are set
forth in detail in the April 30, 2004 Opinion, and familiarity
with that opinion is presumed.*fn7 In brief, plaintiffs
represent a class of investors who, between 1999 and 2001,
engaged in a tax strategy known as Currency Options Bring Reward
Alternatives, or "COBRA." The gravamen of plaintiffs' allegations
is that defendants knew that the tax strategies lacked economic
substance and would be held invalid by the IRS, but falsely held
them out to plaintiffs as legitimate. The strategy was developed
by Jenkens*fn8 and marketed by the BDO Defendants to the
wealthy clients of Pasquale and Dermody.*fn9 Jenkens, and
later Cantley, wrote legal opinion letters attesting to COBRA's
validity and legality. Plaintiffs opened accounts with Deutsche
Bank at the recommendation of Jenkens. Deutsche Bank promoted the
strategy, counseled plaintiffs, and carried out the underlying securities
transactions on plaintiffs' behalf. Plaintiffs claim that
defendants are jointly and severally liable for damages in the
amount of fees paid to defendants in connection with the COBRA
transactions and tax returns, and fees incurred as a result of
federal and state audits.

B. The Consulting Agreements

On October 8, 1999, plaintiff L. Michael Blumin, on behalf of
Jefyle Equipment Corp., Inc., entered into a consulting agreement
with BDO (the "Blumin Agreement"). The Blumin Agreement required
BDO to provide "certain tax, financing and business consulting
services" in connection with the expansion of Jefyle Equipment
Corporation's "business operations into new strategic
markets."*fn10

On October 12, 1999, Thomas Denney, R. Thomas Weeks, Norman R.
Kirisits, and BDO executed a similar consulting agreement (the
"Denney Agreement"). The Denney Agreement required BDO to provide
"consulting services in conjunction with [Denney, Weeks, and
Kirisits's transfer of business operations], including assistance
in structuring the Transaction, assisting the client in
determining a tax treatment for the Transaction, and [preparing]
the 1999 and 2000 income tax returns that would reflect the Transaction."*fn11

Finally, on November 2, 1999, plaintiff Diamond Roofing Co.,
Inc. entered into a consulting agreement with BDO (the "DeStefano
Agreement"). The DeStefano Agreement required BDO to provide
services to Diamond Roofing Company in connection with the
expansion of its "business operations into new strategic
markets."*fn12 Specifically, BDO was to provide the same
services to Diamond Roofing Company that it was providing to
Jefyle Equipment Corporation pursuant to the Blumin
Agreement.*fn13

If any dispute, controversy or claim arises in
connection with the performance or breach of this
Agreement and cannot be resolved by facilitated
negotiations (or the parties agree to waive that
process) then such dispute, controversy or claim
shall be settled by arbitration in accordance with
the laws of the State of New York, and the then current Arbitration Rules for
Professional Accounting and Related Disputes of the
American Arbitration Association ("AAA") except that
no pre-hearing discovery shall be permitted unless
specifically authorized by the arbitration panel, and
shall take place in the city in which the BDO office
providing the relevant Services exists, unless the
parties agree to a different locale.*fn15

Deutsche Bank is not a party to any BDO Agreement.

III. APPLICABLE LAW

Section 3 of the FAA requires a court to enter a stay in a case
where the asserted claims are "referable to arbitration" by
written agreement.*fn16 "Because arbitration is a matter of
contract, exceptional circumstances must apply" before a court
will allow a non-contracting party to impose a contractual
agreement to arbitrate.*fn17 A non-signatory may compel
arbitration on an estoppel theory, where (i) there is a close
relationship between the parties and controversies involved and
(ii) the signatory's claims against the non-signatory are
"`intimately founded in and intertwined with the underlying'"
agreement containing the arbitration clause.*fn18 The Court of Appeals has already found that plaintiffs' conspiracy
allegations establish a "close relationship" between the Deutsche
Bank Defendants and BDO Defendants.*fn19

&nbsp; "The Second Circuit has stressed, however, that it is not the
case that `a claim against a co-conspirator of [the party
entitled to compel arbitration] will always be intertwined to a
degree sufficient to work an estoppel.'"*fn20 This Court
must determine "whether plaintiffs' claims against the Deutsche
Bank defendants are `intimately founded in' or `intertwined with'
the underlying obligations of the consulting
agreements."*fn21 Claims are intertwined "where the merits
of an issue between the parties [i]s bound up with a contract
binding one party and containing an arbitration
clause."*fn22 The Second Circuit has been hesitant to set formalistic rules
for the estoppel inquiry, holding that it "is fact-specific" and
requires "careful review of `the relationship among the parties,
the contracts they signed . . . and the issues that had arisen'
among them."*fn23 Courts have found claims to be intertwined
where the nonsignatory had no obligations under the agreement
containing the arbitration clause,*fn24 where the
intertwined claims did not require interpretation of the
agreement,*fn25 where the signatory's claims did not
exclusively rely on the agreement,*fn26 and where the
intertwined claims may not have been meritorious.*fn27 At a
minimum, the signatory's claims must "`make[] reference to or
presume[] the existence of the written agreement.'"*fn28 The purpose of the doctrine of equitable estoppel "is to
prevent a plaintiff from, in effect, trying to have his cake and
eat it too; that is, from `rely[ing] on the contract when it
works to [his] advantage [by establishing the claim], and
repudiat[ing] it when it works to [his] disadvantage [by
requiring arbitration].'"*fn29 "`The plaintiff's actual
dependence on the underlying contract in making ...

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